Introduction

The rising costs of healthcare have driven businesses to explore innovative benefits options. An Individual Coverage Health Reimbursement Arrangement (ICHRA) provides a solution that empowers both employers and employees. ICHRAs are employer-funded, tax-advantaged accounts that employees use to cover health expenses through individual insurance plans of their choice. This structure enables businesses to offer flexible health benefits without the financial unpredictability of traditional group health plans.

In this article, we’ll uncover how ICHRAs work, why they’re a cost-effective option, and how Forever Employer can help you set up an ICHRA tailored to your company’s needs.

What is an ICHRA?

An Individual Coverage Health Reimbursement Arrangement (ICHRA) is a type of employer-funded health benefit that allows employees to select individual health insurance coverage instead of being enrolled in a company group health plan. Introduced in 2020 under new ACA regulations, ICHRAs were created to offer an affordable, flexible alternative that complies with health coverage requirements while offering the tax advantages of traditional health reimbursement arrangements (HRAs).

ICHRA funding is managed by the employer, who sets aside a specific monthly allowance. Employees then enroll in individual health plans and use their ICHRA funds for qualified expenses, making it a win-win for both cost control and employee satisfaction.

How ICHRA Works in Practice

The ICHRA structure gives employers budget control and administrative simplicity, while employees gain freedom in choosing healthcare options that fit their specific needs. Here’s a quick breakdown:

• Budget-Friendly Setup: Employers determine a monthly allowance that employees can use toward their individual health plan premiums or other eligible expenses.
• Employee-Centered Coverage: Instead of one-size-fits-all group health plans, employees can select coverage from the individual market or Medicare, depending on their eligibility and preferences.
• Reimbursements Made Simple: Once employees incur qualified expenses, they submit for reimbursement, and funds are provided tax-free, simplifying management for the employer.

For many companies, an ICHRA offers an easier way to provide ACA-compliant health benefits while focusing on budget predictability.

Benefits of Offering an ICHRA

ICHRA plans provide multiple benefits that appeal to both employers and employees:

1. Cost Efficiency
   • ICHRA allows businesses to set a defined monthly allowance, offering greater control over healthcare spending. By avoiding the premium increases that often come with group plans, employers can focus on a predictable benefits budget.
2. Flexibility for Employee Needs
   • Employees have unique healthcare needs, and ICHRA enables them to select plans that best suit their situations. This flexibility results in higher employee satisfaction, as workers feel empowered to choose their healthcare coverage.
3. Enhanced Recruitment & Retention
   • Offering an ICHRA can make your business more attractive to new hires -especially those who value personalized benefits options. It’s a forward-thinking approach that signals your commitment to employee well-being, ultimately boosting retention.

Setting Up an ICHRA with Forever Employer

Setting up an ICHRA doesn’t have to be complicated. At Forever Employer, we simplify the process by guiding you through every step, from planning and compliance to employee communication. Here’s what you can expect:

• Defining Eligibility: We assist in creating eligibility classes, ensuring that only eligible/qualified employees receive ICHRA benefits.
• Setting Budgets and Reimbursement Rules: We help you establish the monthly allowance per employee class, keeping your budget aligned with your goals. We also look to work with your accountant/CPA to ensure that everyone is on the same page with the benefits.
• Streamlined Employee Communication: We provide resources to educate employees on how to use their ICHRA benefits effectively, reducing any confusion and making adoption seamless.

Our expert team ensures your ICHRA setup is compliant, efficient, and designed to meet your unique business needs.

Individual Coverage HRAs are a powerful tool for businesses looking to control health benefits costs while enhancing employee satisfaction. By offering a flexible, tax-advantaged health benefit that empowers your workforce, you can support employees without the financial strain of traditional group plans.